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As the fight for dominance of South Africa’s retail-banking segment hots up, Absa, once the nation’s biggest consumer lender, is considering a change in tactics to boost revenue.
At least three challengers are planning to rival the five largest lenders such as Standard Bank [JSE:SBK] and FirstRand [JSE: FSR], who between them own 91% of banking assets in the country.
The entrants include Discovery [JSE:DSY] and billionaire Patrice Motsepe’s TymeBank, which rely on digital models that allow them to tightly control costs and keep fees low.
"None of those propositions scare me," said Cowyk Fox, managing executive of Everyday Banking at Absa’s Retail and Business Bank. "We can compete with that quite comfortably. Digital banks have sparked off a new conversation about pricing. They say that they can offer a better price because they don’t have the big cost base of a legacy bank, which is fair, but I think there’s more to it than that."
Retaining clients
The division aims to retain its clients by offering better prices to loyal clients, responding faster to their needs and proactively managing their accounts, Fox said.
An example would include calling a customer whose salary hadn’t been paid into their account and offering assistance, he said.
The Johannesburg-based lender is seeking to defend its retail-client base, where home loans rose for the first time in four years in the six months through June.
Absa chief executive officer Maria Ramos has refocused the company in an effort to regain lost market share by announcing a new strategy in March that will allow the firm to take on more risk after London-based Barclays cut its former controlling down to below 15 %.
"If you build up a lifetime relationship with a customer surely your pricing philosophy should recognise that," Fox said.
The lender also aims increase the business it does with its existing clients, many of which hold accounts with other banks.
Retail and business banking were the first of Absa’s divisions to undergo a management restructuring in June as the lender, like others in South Africa, contends with an economy that shrank in the first half.
Earlier this month, the unit presented its plans to Absa’s board, which includes driving growth in loans, which had stagnated over the past two years, and deposits, where margins came under pressure in the six months through June.
"There’s capacity for lending in the right spaces in the market but it depends on where the economy goes," Fox said. "A lot of customers are good for credit, but they are sitting tight waiting to see where the economy goes."
The share was trading at R153.16 at 10:15 on the JSE, down by 0.58%.
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